Who’s responsible for the so-called ‘compensation culture?’

Much has been made of the so-called ‘compensation culture’ gripping the UK, and most pundits and politicians have bandied blame about like it was going out of style; the usual targets for righteous indignation have been unscrupulous personal injury solicitors looking to cash in my encouraging frivolous personal injury claims, but how truly responsible is the legal profession?

Truth be told, the amount of claims being made has gone up in recent years by around 70 per cent, even as the number of accidents – especially car accidents – has actually gone down by around 23 per cent.  This means that, even though there are less accidents actually occurring, more people are making claims against insurers than they were – and in significant figures.

You can’t make a claim on your own – well, you can, but you’re much better off working with some sort of legal professional if you want to prevail on your claim – so naturally people think that personal injury lawyers have been driving up the number of claims by taking on anyone and everyone with a sore neck or a bruised ego.  Yes, there are some disreputable firms that send unsolicited text messages and emails or make cold calls, but where do these firms get these email addresses and phone numbers in the first place?

Well, guess what – the insurance industry supplies law firms and claims management companies with this information.  Wait a tic, you might be thinking – why would they do that?  Well, the short answer is money.  The long answer is shedloads of money.

Insurers don’t give this information away for free; instead, they charge claims management companies and law firms for the information.  It’s called ‘taking referral fees,’ and the premise behind it is that they sell on the personal details of their customers who were involved in road traffic accidents through no fault of their own, which means any claims made won’t be against them but whoever insures the other person involved in the accident – and since this is most likely a rival, it’s considered a good thing to make it harder for your competitor to stay in business by making their operating costs higher.

Of course, this cuts both ways.  When every insurer does it to every one of their rivals, it swiftly becomes a roiling ball of court costs and legal fees, which means insurers need to raise their rates to cover these costs – and you and I end up footing the bill.  So don’t immediately think the legal industry is the only source of trouble; if insurers weren’t so pig-headed we wouldn’t have this problem, either.

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